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Simon Rubinsohn, RICS chief economist had this to say…

“Today’s decision by the MPC to leave base rates on hold is understandable given the ongoing concern about the inflation outlook. But the RICS still believes that the weakening economic picture, as signalled most visibly by the deterioration in both business and consumer sentiment, will justify an easing in policy later in the year.

Crucially, given Mervyn King’s remit, there is at this stage very little evidence of second round effects from the jump in food and energy costs. That said, it is not surprising that the Bank wants a little more convincing that inflation expectations are not ratcheting upwards.

Meanwhile, the release of the latest house price figures from the Halifax underlines the deteriorating fortunes of the housing market. Tighter bank lending is restricting transaction activity and hitting confidence. While this is in part a function of the wider economic problems, there are still measures that the government can take to ease the pain of first time buyers, where a couple have to save up to a year’s worth of combined take home pay in order to access the market. For example, fundamental reform of stamp duty from a ’slab’ to a ‘marginal’ system would make it fairer and would reduce entry barriers for first time buyers.”

I’m a fan of the proposed stamp duty reform, please let us have it government, please!

Just as expected, the MPC have kept interest rates at 5%.

• Michael Coogan, director general of the Council of Mortgage Lenders had this to say…“We expected the MPC to hold rates today as it wrestles to control rising inflation in a weaker economic outlook. But clearly there are still affordability pressures on borrowers and a widespread funding shortage for lenders. We hope that as the effects of the Bank of England’s liquidity scheme feed through the financial system there will be some benefits for mortgage lenders, and in turn borrowers, later in the year.”
• Helen Adams, MD at FirstRungNow.com commented on the affect on first time buyers…“Today’s announcement leaving no change in interest rates means a period of stability which is good for first time buyers. Low-ish interest rates mean that mortgages are no more expensive than last year. With property prices stabilising too, there is no rush to get onto the property ladder. However, the reluctance of mortgage-lenders to lend first timers as much as they used to, means that many will only achieve their home-ownership goals if working with their parents either for help with the deposit or some sort of co-financing.”
• Liam Bailey, head of residential research at KnightFrank, was disappointed in the decision…“Maintaining rates at 5.00% is not at all helpful for the UK housing market. The market remains under very significant pressure at the moment, year on year sales volumes are down by more than 50% and prices have fallen by 7% since the peak in October last year. The difficulties experienced by mortgage borrowers accessing finance are likely to continue putting further pressure on prices and volumes. The Bank of England have a difficult job in squaring the need for easier credit conditions with inflationary pressures elsewhere in the economy. Our view is that the UK housing market will see prices fall by at least 5% in 2008, but without lower base rates and a more normalised mortgage market we could easily see price falls well into double digits.”
• Neil Chegwidden, Head of Residential Research at Jones Lang LaSalle comments… “millions of UK households and homeowners will notionally be ‘understanding’ of the position facing the Monetary Policy Committee (MPC) – stuck between a rock, spiraling inflation, and a hard place, a deteriorating economy and housing market. Today the MPC has come down on the side of the rock, rather than the hard place which suggests, in simplistic terms, that they are more concerned about inflation than a recession.”

Technorati Tags: property, real estate, economy, interest rates

The Bank of England have done the expected and reduced interests rates from 5.25% to 5%. It’s the third cut since December and the decision is said to be largely based on the problems with the housing market. Unlike with previous cuts, homeowners should be feeling the full benefit of this reduction with nine of the big lenders quickly announcing that they would pass on the full reduction to those customers with standard variable mortgages. Those on fixed rate mortgages are likely to be especially disappointed. Oh dear, I’ll put the kettle on.

Technorati Tags: Interest rates, mortgages, property, real estate